Eprss Prepaid Recharge Services India P.Ltd, Pune V. Income tax Officer,

ITA 86/PUN/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0262 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 05-12-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 12-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARISES OUT OF PASSED
• Keywords: Double taxation relief; Retrospective amendment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT . / ITA NO.86/PUN/2017 / ASSESSMENT YEAR : 2012-13 EPRSS PREPAID RECHARGE SERVICES INDIA PVT. LTD., 207, KPCT COMMERCIAL COMPLEX, 2 ND FLOOR, WANOWRIE, FATIMANAGAR, PUNE 411 013 PAN : AABCE5025H VS. ITO, WARD-1(3), PUNE (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSE D BY THE CIT(A)-1, PUNE ON 06-10-2016 IN RELATION TO THE ASSESSMENT YEAR 2012-13. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.46,28,457/- MADE BY THE ASSESSING OFFICER (AO) U/S. 40(A)(I) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED AS THE ACT). APPELLANT BY SHRI KISHOR PHADKE RESPONDENT BY SHRI RAJESH GAWALI DATE OF HEARING 05-12-2018 DATE OF PRONOUNCEMENT 05-12-2018 ITA NO.86/PUN/2017 EPRSS PREPAID RECHARGE SERVICES INDIA PVT. LTD., 2 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESS EE IS A PRIVATE LIMITED COMPANY ENGAGED IN DISTRIBUTION OF RECHARGE PENS OF VARIOUS DTH PROVIDERS VIA ONLINE NETWOR K. THE ASSESSEE CLAIMED DEDUCTION, INTER ALIA, FOR A SUM OF RS.46,28,457/- TOWARDS WEB HOSTING CHARGES PAID TO AMAZ ON WEB SERVICES LLC (AMAZON) FOR USE OF ITS CLOUD UNITS ON HIRE BASIS. THE AO OBSERVED THAT NO DEDUCTION OF TAX AT SOURCE WAS MADE. TREATING SUCH PAYMENT AS ROYALTY COVERED U/S. 9(1)(VI) READ WITH EXPLANATION 2 (IVA) AND EXPLANATION 5, THE AO HELD THAT THE AMOUNT OF WEB HOSTING CHARGES WAS LIABLE TO TAX IN THE HANDS OF AMAZON. SINCE THE ASSESSEE FAILED TO WITHHOLD TAX ON THE PAYMENT MADE TO AMAZON, THE AO INVOKED THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT AND MA DE DISALLOWANCE. NO RELIEF WAS ALLOWED IN THE FIRST APPEAL. 4. I HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE R ELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT SIMILAR DISALLOWANCE WAS MADE BY THE AUTHORITIES BELOW IN RELATION TO THE TWO PRECEDING ASSESSMENT YEARS, NAMELY, 2010-11 AND 2011-1 2. VIDE ITS ORDER DATED 24-10-2018, THE TRIBUNAL IN ITA NO. 828/PUN/2016 AND ITA NO.1204/PUN/2016 HAS DELETED THE DISALLOWANCE BY HOLDING THAT EXPLANATION 5 HAS BEEN INSERTED ITA NO.86/PUN/2017 EPRSS PREPAID RECHARGE SERVICES INDIA PVT. LTD., 3 TO SECTION 9(1)(VI) BY THE FINANCE ACT, 2012 WITH RETROSPECTIVE EFFECT ON 01-06-1976 AND SINCE THE PAYMENT HAD ALREADY B EEN MADE BEFORE THE INSERTION OF THE PROVISION, NO DEDUCTION OF TAX AT SOURCE COULD HAVE BEEN MADE. THE TRIBUNAL FURTHER OBSERVED THAT THERE WAS NO AMENDMENT IN THE DTAA BETWEEN THE TWO COUNTRIES ANALOGOUS TO THE EXPLANATION 5 TO SECTION 9(1) OF THE ACT AND ACCORDINGLY AMAZON WAS NOT CHARGEABLE TO TAX IN RESPECT OF WEB HOSTING CHARGES RECEIVED FROM THE ASSESSEE IN INDIA. THE TRIBUNAL STILL FURTHER HELD THAT THE AMOUNT PAID TO AMAZON, AT THE FIRST INSTANCE, WAS NOT IN THE NATURE OF ROYALTY ITSELF. THE LD. DR FAIRLY ADMITTED THAT THE FACTS AND CIRCUMSTANCES PREVAILING IN THE INSTANT YEAR ARE MUTATIS MUTANDIS SIMILAR TO THOSE OF PRECEDING YEARS. RESPECTFULLY FOLLOWING THE PRECEDENT, I OVERTURN THE IMPUGNED ORDER ON THIS SCORE AND ORDER FOR THE DELETION OF ADDITION OF RS.46,28,457/- MADE AND CONFIRMED BY THE AUTHORITIES BELOW . 5. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH DECEMBER, 2018. SD/- (R.S.SYAL) / VICE PRESIDENT PUNE; DATED : 05 TH DECEMBER , 2018 ITA NO.86/PUN/2017 EPRSS PREPAID RECHARGE SERVICES INDIA PVT. LTD., 4 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (APPEALS)-1, PUNE 4. / THE PR. CIT-1, PUNE 5. , , SMC / DR SMC, ITAT, PUNE; 6. / GUARD FILE. // TRUE COPY // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE ITA NO.86/PUN/2017 EPRSS PREPAID RECHARGE SERVICES INDIA PVT. LTD., 5 DATE 1. DRAFT DICTATED ON 05-12-18 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 05-12-18 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *